Subsequent Events and Subsequently Discovered Facts
559
AU-C Section 560
Subsequent Events and Subsequently
Discovered Facts
Source: SAS No. 122.
Effective for audits of financial statements for periods ending on or
after December 15, 2012.
Introduction
Scope of This Section
.01 This section addresses the auditor's responsibilities relating to subsequent events and subsequently discovered facts in an audit of financial statements. It also addresses a predecessor auditor's responsibilities for subsequent
events and subsequently discovered facts when reissuing the auditor's report
on previously issued financial statements that are to be presented on a comparative basis with audited financial statements of a subsequent period. (Ref:
par. .A1)
Subsequent Events and Subsequently Discovered Facts
.02 Financial statements may be affected by certain events that occur after the date of the financial statements. Many financial reporting frameworks
specifically refer to such events. Such financial reporting frameworks ordinarily
identify two types of events:
a.
Those that provide evidence of conditions that existed at the date
of the financial statements
b.
Those that provide evidence of conditions that arose after the date
of the financial statements
.03 Section 700, Forming an Opinion and Reporting on Financial Statements, explains that the date of the auditor's report informs the user of the
auditor's report that the auditor has considered the effect of events and transactions of which the auditor becomes aware and that occurred up to that date. 1
Accordingly, this section addresses the auditor's responsibilities relating to subsequent events occurring between the date of the financial statements and the
date of the auditor's report that require adjustment of, or disclosure in, the
financial statements. It also addresses the auditor's responsibilities relating to
subsequently discovered facts that become known to the auditor after the date
of the auditor's report.
Effective Date
.04 This section is effective for audits of financial statements for periods
ending on or after December 15, 2012.
1
Paragraph .A38 of section 700, Forming an Opinion and Reporting on Financial Statements.
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Objectives
.05 The objectives of the auditor are to
a.
obtain sufficient appropriate audit evidence about whether events
occurring between the date of the financial statements and the
date of the auditor's report that require adjustment of, or disclosure in, the financial statements are appropriately reflected
in those financial statements in accordance with the applicable
financial reporting framework and
b. respond appropriately to facts that become known to the auditor
after the date of the auditor's report that, had they been known
to the auditor at that date, may have caused the auditor to revise
the auditor's report.
.06 The objective of a predecessor auditor who is requested to reissue a previously issued auditor's report on financial statements that are to be presented
on a comparative basis with audited financial statements of a subsequent period is to perform specified procedures to determine whether the previously
issued auditor's report is still appropriate before such report is reissued.
Definitions
.07 For purposes of generally accepted auditing standards, the following
terms have the meanings attributed as follows:
Date of the auditor’s report. The date that the auditor dates the
report on the financial statements, in accordance with section
700. 2 (Ref: par. .A14)
Date of the financial statements. The date of the end of the latest
period covered by the financial statements.
Subsequent events. Events occurring between the date of the financial statements and the date of the auditor's report.
Subsequently discovered facts. Facts that become known to the
auditor after the date of the auditor's report that, had they been
known to the auditor at that date, may have caused the auditor
to revise the auditor's report.
.08 Reference to audited financial statements in this section means the
financial statements, together with the auditor's report thereon.
Requirements
Subsequent Events
.09 The auditor should perform audit procedures designed to obtain sufficient appropriate audit evidence that all subsequent events that require adjustment of, or disclosure in, the financial statements have been identified. The
auditor is not, however, expected to perform additional audit procedures on
matters to which previously applied audit procedures have provided satisfactory conclusions. (Ref: par. .A2–.A3)
.10 The auditor should perform the procedures required by paragraph .09
so that they cover the period from the date of the financial statements to the
date of the auditor's report or as near as practicable thereto. The auditor should
2
Paragraph .41 of section 700.
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take into account the auditor's risk assessment in determining the nature and
extent of such audit procedures, which should include the following: (Ref: par.
.A4–.A5 and .A8–.A10)
a.
Obtaining an understanding of any procedures that management
has established to ensure that subsequent events are identified
b. Inquiring of management and, when appropriate, those charged
with governance about whether any subsequent events have occurred that might affect the financial statements (Ref: par. .A6)
c. Reading minutes, if any, of the meetings of the entity's owners,
management, and those charged with governance that have been
held after the date of the financial statements and inquiring about
matters discussed at any such meetings for which minutes are not
yet available (Ref: par. .A4 and .A7)
d. Reading the entity's latest subsequent interim financial statements, if any
.11 If, as a result of the procedures performed as required by paragraphs
.09–.10, the auditor identifies subsequent events that require adjustment of, or
disclosure in, the financial statements, the auditor should determine whether
each such event is appropriately reflected in the financial statements in accordance with the applicable financial reporting framework.
Subsequently Discovered Facts That Become Known to the
Auditor Before the Report Release Date
.12 The auditor is not required to perform any audit procedures regarding
the financial statements after the date of the auditor's report. However, if a
subsequently discovered fact becomes known to the auditor before the report
release date, 3 the auditor should
a.
discuss the matter with management and, when appropriate,
those charged with governance.
b. determine whether the financial statements need revision and, if
so, inquire how management intends to address the matter in the
financial statements.
.13 If management revises the financial statements, the auditor should
perform the audit procedures necessary in the circumstances on the revision.
The auditor also should either (Ref: par. .A11–.A16)
a.
b.
3
date the auditor's report as of a later date; extend the audit procedures referred to in paragraphs .09–.10 to the new date of the
auditor's report on the revised financial statements; and request
written representations from management as of the new date of
the auditor's report, in accordance with the requirements of section 580, Written Representations, or
include an additional date in the auditor's report on the revised
financial statements that is limited to the revision (that is, dualdate the auditor's report for that revision), thereby indicating that
the auditor's procedures subsequent to the original date of the
auditor's report are limited solely to the revision of the financial
statements described in the relevant note to the financial statements. In this circumstance, the auditor should request written
The term report release date is defined in paragraph .06 of section 230, Audit Documentation.
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representations from management as of the additional date in the
auditor's report about whether
i. any information has come to management's attention that
would cause management to believe that any of the previous representations should be modified.
ii. any other events have occurred subsequent to the date of
the financial statements that would require adjustment to,
or disclosure in, those financial statements.
.14 If management does not revise the financial statements in circumstances when the auditor believes they need to be revised, the auditor should
modify the opinion (express a qualified opinion or an adverse opinion), as required by section 705, Modifications to the Opinion in the Independent Auditor's
Report. (Ref: par. .A17)
Subsequently Discovered Facts That Become Known to the
Auditor After the Report Release Date
.15 If a subsequently discovered fact becomes known to the auditor after
the report release date, the auditor should (Ref: par. .A18–.A20)
a.
discuss the matter with management and, when appropriate,
those charged with governance.
b.
determine whether the financial statements need revision and, if
so, inquire how management intends to address the matter in the
financial statements.
.16 If management revises the financial statements, the auditor should
a.
apply the requirements of paragraph .13.
b.
if the audited financial statements (before revision) have been
made available to third parties, assess whether the steps taken
by management are timely and appropriate to ensure that anyone
in receipt of those financial statements is informed of the situation, including that the audited financial statements are not to
be relied upon. If management does not take the necessary steps,
the auditor should apply the requirements of paragraph .18. (Ref:
par. .A21–.A22)
c.
if the auditor's opinion on the revised financial statements differs from the opinion the auditor previously expressed, disclose
the following matters in an emphasis-of-matter or other-matter
paragraph, in accordance with section 706, Emphasis-of-Matter
Paragraphs and Other-Matter Paragraphs in the Independent Auditor's Report:
i. The date of the auditor's previous report
ii. The type of opinion previously expressed
iii. The substantive reasons for the different opinion
iv. That the auditor's opinion on the revised financial statements is different from the auditor's previous opinion
.17 If management does not revise the financial statements in circumstances when the auditor believes they need to be revised, then
a.
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if the audited financial statements have not been made available
to third parties, the auditor should notify management and those
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charged with governance—unless all of those charged with governance are involved in managing the entity 4 —not to make the
audited financial statements available to third parties before the
necessary revisions have been made and a new auditor's report on
the revised financial statements has been provided. If the audited
financial statements are, nevertheless, subsequently made available to third parties without the necessary revisions, the auditor
should apply the requirements of paragraph .17b.
b.
if the audited financial statements have been made available to
third parties, the auditor should assess whether the steps taken
by management are timely and appropriate to ensure that anyone
in receipt of the audited financial statements is informed of the
situation, including that the audited financial statements are not
to be relied upon. If management does not take the necessary
steps, the auditor should apply the requirements of paragraph
.18. (Ref: par. .A21–.A22)
.18 If management does not take the necessary steps to ensure that anyone
in receipt of the audited financial statements is informed of the situation, as
provided by paragraphs .16b or .17b, the auditor should notify management and
those charged with governance—unless all of those charged with governance
are involved in managing the entity 5 —that the auditor will seek to prevent future reliance on the auditor's report. If, despite such notification, management
or those charged with governance do not take the necessary steps, the auditor should take appropriate action to seek to prevent reliance on the auditor's
report. (Ref: par. .A23–.A26)
Predecessor Auditor’s Reissuance of the Auditor’s Report in
Comparative Financial Statements (Ref: par. .A27–.A28)
Predecessor Auditor’s Report Reissued (Ref: par. .A29–.A30)
.19 Before reissuing a previously issued auditor's report on financial statements that are to be presented on a comparative basis with audited financial
statements of a subsequent period, the predecessor auditor should perform the
following procedures to determine whether the previously issued auditor's report is still appropriate:
a.
Read the financial statements of the subsequent period to be presented on a comparative basis
b.
Compare the prior period financial statements that the predecessor auditor reported on with the financial statements of the
subsequent period to be presented on a comparative basis
c.
Inquire of, and request written representations from, management of the former client, at or near the date of reissuance, about
whether
i. any information has come to management's attention that
would cause management to believe that any of the previous representations should be modified
4
Paragraph .14 of section 260, The Auditor's Communication With Those Charged With Governance.
5
Paragraph .14 of section 260.
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ii. any events have occurred subsequent to the date of the
latest prior period financial statements reported on by the
predecessor auditor that would require adjustment to, or
disclosure in, those financial statements
d.
Obtain a representation letter from the successor auditor stating
whether the successor auditor's audit revealed any matters that,
in the successor auditor's opinion, might have a material effect
on, or require disclosure in, the financial statements reported on
by the predecessor auditor
.20 If, in performing the procedures in paragraph .19, a subsequently discovered fact becomes known to the predecessor auditor, then
a.
the predecessor auditor should apply the requirements of paragraph .15.
b.
if management revises the financial statements and the predecessor auditor plans to issue a new auditor's report on the revised
financial statements, the predecessor auditor should apply the
requirements of paragraph .16.
c.
if management revises the financial statements and the predecessor auditor does not plan to issue a new auditor's report on the
revised financial statements, or if management does not revise
the financial statements in circumstances when the predecessor
auditor believes they need to be revised, the predecessor auditor should assess the steps taken by management, as required by
paragraph .17b.
Application and Other Explanatory Material
Scope of This Section (Ref: par. .01)
.A1 When audited financial statements are included in other documents
subsequent to their issuance, the auditor may have additional responsibilities
to consider, such as legal or regulatory requirements involving private placement offerings, exempt public offerings (including offerings pursuant to Securities and Exchange Commission [SEC] Rule 144A), or other offerings of securities to the public in jurisdictions outside the United States. Section 720, Other
Information in Documents Containing Audited Financial Statements, may be
applied, adapted as necessary in the circumstances, to such other documents.
Section 925, Filings With the U.S. Securities and Exchange Commission Under
the Securities Act of 1933, addresses the auditor's responsibilities in connection
with financial statements of a nonissuer included in a registration statement
filed with the SEC under the Securities Act of 1933, as amended.
Subsequent Events (Ref: par. .09–.11)
.A2 The period between the date of the financial statements and the date
of the auditor's report may vary from a relatively short period to one or more
months. Some phases of the audit will be performed during this period, whereas
other phases will be substantially completed on or before the date of the financial statements. As an audit approaches completion, the auditor is not expected to perform additional audit procedures on matters to which previously
applied audit procedures have provided satisfactory conclusions. New information, however, may be inconsistent with the audit evidence obtained, in which
case the auditor is required to determine what modifications or additions to
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audit procedures are necessary to resolve the matter and consider the effect of
the matter, if any, on other aspects of the audit. 6
.A3 Depending on the auditor's risk assessment, the audit procedures required by paragraphs .09–.10 may include procedures necessary to obtain sufficient appropriate audit evidence involving the review or testing of accounting
records or transactions occurring between the date of the financial statements
and the date of the auditor's report. The audit procedures required by paragraphs .09–.10 are in addition to procedures that the auditor may perform
for other purposes that, nevertheless, may provide evidence about subsequent
events (for example, to obtain audit evidence for account balances as of the date
of the financial statements, such as cut-off procedures or procedures regarding
subsequent receipts of accounts receivable).
.A4 Paragraph .10 stipulates certain audit procedures that the auditor
is required to perform pursuant to paragraph .09. However, the subsequent
events procedures that the auditor performs may depend on the information
that is available and, in particular, the manner in which the accounting records
have been maintained and the extent to which information has been prepared
since the date of the financial statements. When interim financial statements
(whether for internal or external purposes) or minutes of meetings of management or those charged with governance have not been prepared, relevant audit
procedures may take the form of inspection of available books and records.
.A5 In addition to the audit procedures required by paragraphs .09–.10,
the auditor may consider it necessary and appropriate to read the entity's latest
available budgets, cash flow forecasts, and other related management reports
for periods after the date of the financial statements. Paragraphs .A6–.A10
provide guidance on additional matters that the auditor may consider in the
course of performing subsequent events procedures.
Inquiry (Ref: par. .10b)
.A6 In inquiring of management and, when appropriate, those charged
with governance about whether any subsequent events have occurred that
might affect the financial statements, the auditor may inquire about the current status of items that were accounted for on the basis of preliminary or
inconclusive data and may make specific inquiries about the following matters:
6
•
Whether new commitments, borrowings, or guarantees have been
entered into
•
Whether sales or acquisitions of assets have occurred or are
planned
•
Whether there have been increases in capital or issuance of debt
instruments, such as the issue of new shares or debentures, or an
agreement to merge or liquidate has been made or is planned
•
Whether any assets have been appropriated by the government or
destroyed (for example, by fire or flood)
•
Whether there have been any developments regarding contingencies
•
Whether any unusual accounting adjustments have been made or
are contemplated
Paragraph .10 of section 500, Audit Evidence.
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•
Whether any events have occurred or are likely to occur that will
bring into question the appropriateness of accounting policies used
in the financial statements, as would be the case, for example, if
such events call into question the validity of the going concern
assumption
•
Whether any events have occurred that are relevant to the measurement of estimates or provisions made in the financial statements
•
Whether any events have occurred that are relevant to the recoverability of assets
Reading Minutes (Ref: par. .10c)
Considerations Specific to Governmental Entities
.A7 In audits of governmental entities, the auditor may, in performing the
requirement in paragraph .10c, read the official records of relevant proceedings
of the legislative or governing body, or other relevant regulatory or oversight
body, and inquire about matters addressed in proceedings for which official
records are not yet available.
Inquiries of Legal Counsel
.A8 Section 501, Audit Evidence—Specific Considerations for Selected
Items, addresses the auditor's responsibility to seek direct communication
with the entity's legal counsel concerning litigation, claims, and assessments
through the date of the auditor's report.
Written Representations
.A9 Section 580 requires the auditor to request that management and,
when appropriate, those charged with governance provide written representations as of the date of the auditor's report that all events occurring subsequent
to the date of the financial statements, and for which the applicable financial
reporting framework requires adjustment or disclosure, have been adjusted or
disclosed. 7 The auditor may consider whether written representations covering
particular subsequent events or significant matters disclosed to the auditor in
the performance of the audit procedures required by paragraphs .09–.10 may
be necessary to support other audit evidence to obtain sufficient appropriate
audit evidence.
.A10 The applicable financial reporting framework may require management to evaluate subsequent events through the date the financial statements
are issued or available to be issued and to disclose the date through which subsequent events were evaluated in the financial statements. In most cases, this
will result in the date that management discloses as the date through which
management has evaluated subsequent events being the same date as the auditor's report. This is because section 700 requires the auditor's report to be
dated no earlier than the date on which the auditor has obtained sufficient
appropriate audit evidence on which to base the auditor's opinion on the financial statements, including evidence that the audit documentation has been
reviewed; that all the statements that comprise the financial statements, including related notes, have been prepared; and that management has asserted
7
Paragraph .18 of section 580, Written Representations.
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that they have taken responsibility for those financial statements. 8 Also, the
auditor is concerned with subsequent events that require adjustment of, or disclosure in, the financial statements through the date of the auditor's report or
as near as practicable thereto. Therefore, management's representations concerning events occurring subsequent to the date of the financial statements and
for which the applicable financial reporting framework requires adjustment or
disclosure are required to be made as of the date of the auditor's report on the
financial statements. 9 To align the date disclosed by management in the financial statements, the representation letter date, and the auditor's report date,
the auditor may discuss the dating requirements with management and may
also include, in the terms of the audit engagement, 10 that management will not
date the subsequent event disclosure earlier than the date of the representation
letter (also the date of the auditor's report).
Subsequently Discovered Facts That Become Known to the
Auditor Before the Report Release Date (Ref: par. .12–.14)
Dating the Auditor’s Report on the Revised Financial Statements
(Ref: par. .13)
.A11 The auditor has two methods available for dating the auditor's report
when the financial statements are revised after the original date of the auditor's
report. The auditor may include an additional date limited to the revision (that
is, dual-date the auditor's report for that revision) or date the auditor's report
as of a later date. In the former instance, the auditor's responsibility for events
occurring subsequent to the original date of the auditor's report is limited to
the specific event described in the relevant note to the financial statements. In
the latter instance, the auditor's responsibility for subsequent events extends
to the new date of the auditor's report on the revised financial statements.
.A12 Generally, when the revision of the financial statements is specifically limited to the effects of the specific event described in the relevant note
to the financial statements, the auditor may decide to limit the audit procedures to that revision, as provided by paragraph .13b. Even when the financial
statements are revised and disclosure of the revision is made, the auditor is not
precluded from extending the audit procedures referred to in paragraphs .09–
.10 to the new date of the auditor's report on the revised financial statements,
as provided by paragraph .13a.
.A13 When, in the circumstances described in paragraph .13b, the auditor
includes an additional date limited to the revision (a dual date), the original
date of the auditor's report on the financial statements prior to their subsequent
revision by management remains unchanged because this date informs the
reader about when the auditor obtained sufficient appropriate audit evidence
with respect to those financial statements prior to their subsequent revision.
However, an additional date is included in the auditor's report to inform users
that the auditor's procedures subsequent to the original date of the auditor's
report were limited to the subsequent revision of the financial statements. The
following is an illustration of such wording:
(Date of auditor's report), except as to note Y, which is as of (date of completion
of audit procedures limited to revision described in note Y).
8
Paragraph .41 of section 700.
Paragraph .20 of section 580.
10
Paragraph .A23 of section 210, Terms of Engagement.
9
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.A14 As discussed in paragraph .A10, section 700 requires the auditor's
report to be dated no earlier than the date on which the auditor has obtained
sufficient appropriate audit evidence on which to base the auditor's opinion
on the financial statements. 11 When management revises the financial statements and the auditor reports on the revised financial statements, the new
date (or the dual date) included in the auditor's report cannot be earlier than
the date on which the auditor carried out the audit procedures necessary in
the circumstances on the revision, including that the documentation has been
reviewed and management has prepared and asserted that they have taken
responsibility for the revised financial statements.
Updated Written Representations
.A15 Section 580 requires the date of the written representations to be as
of the date of the auditor's report on the financial statements. 12 If management
revises the financial statements and, in accordance with paragraph .13a, the
auditor dates the auditor's report on the revised financial statements as of a
later date, written representations from management are required as of the
later date to comply with section 580. The auditor may request management to
provide a new representation letter or may agree with management on a form
of written representations that update the written representations previously
provided by addressing whether there are any changes to such written representations and, if so, what they are. An updated written representation letter
may be in the form of the representations required by paragraph .13b when the
auditor dual-dates the auditor's report for the revision.
Unaudited Events
.A16 To prevent the financial statements from being misleading, management may revise the financial statements by disclosing an event that arose
after the original date of the auditor's report. When such event is included in
a separate financial statement note that is labeled as unaudited (for example,
when the event is captioned "Event (Unaudited) Subsequent to the Date of the
Independent Auditor's Report"), the auditor is not required to perform any procedures on the revision, and the auditor's report carries the original date of the
auditor's report.
Considerations Specific to Governmental Entities (Ref: par. .14)
.A17 In audits of governmental entities in which management does not revise the financial statements, the actions taken in accordance with paragraph
.14 may also include reporting separately to the legislative or governing body,
or other relevant regulatory or oversight body, on the implications of the subsequent event for the financial statements and the auditor's report and, if applicable, for the entity's internal control over financial reporting and compliance
with law or regulation.
Subsequently Discovered Facts That Become Known to the
Auditor After the Report Release Date (Ref: par. .15–.18)
Auditor’s Responsibility After the Report Release Date (Ref: par. .15)
.A18 New information may come to the auditor's attention that, had such
information been known to the auditor at the date of the auditor's report, may
have caused the auditor to revise the auditor's report. When such information
11
12
Paragraph .41 of section 700.
Paragraph .20 of section 580.
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becomes known to the auditor after the report release date, the requirements in
paragraphs .15–.18 apply, even if the auditor has withdrawn or been discharged.
.A19 Because of the variety of conditions that might be encountered, the
specific procedures or actions to be taken in a particular case may vary somewhat in light of the circumstances. For example, in determining whether the
financial statements need revision, as required by paragraph .15b, the auditor
may consider, in addition to the requirements of the applicable financial reporting framework, whether the auditor believes there are persons currently
relying or likely to rely on the financial statements who would attach importance to the subsequently discovered facts. Consideration may be given, among
other things, to the issuance of audited financial statements for a subsequent
period, the time elapsed since the financial statements were issued and the
auditor's report released, and any legal implications.
.A20 Section 708, Consistency of Financial Statements, addresses the auditor's evaluation of the consistency of the financial statements, including changes
to previously issued financial statements, and the effect of that evaluation on
the auditor's report.
Revision of Financial Statements by Management (Ref: par. .16b and .17b)
.A21 The steps taken by management to ensure that anyone in receipt of
the audited financial statements is informed of the situation, including that the
audited financial statements are not to be relied upon, depend on the circumstances. Management's steps may include the following:
•
Notification to anyone who is known to be relying or who is likely to
rely on the financial statements and the auditor's report that they
are not to be relied upon and that revised financial statements,
together with a new auditor's report, will be issued. This may be
necessary when the issuance of revised financial statements and
a new auditor's report is not imminent.
•
Issuing, as soon as practicable, revised financial statements with
appropriate disclosure of the matter.
•
Issuing the subsequent period's financial statements with appropriate disclosure of the matter. This may be appropriate when
issuance of the subsequent period's audited financial statements
is imminent.
Considerations Specific to Governmental Entities
.A22 For audits performed under Government Auditing Standards, additional requirements exist, such as those pertaining to the evaluation of the
timeliness and appropriateness of management's disclosure and actions to determine and correct misstatements in previously issued financial statements,
reporting on the revised financial statements, and reporting directly to appropriate officials when management does not take the necessary steps.
Auditor Action to Seek to Prevent Reliance on the Auditor’s Report
(Ref: par. .18)
.A23 If management made the audited financial statements available to
third parties despite the auditor's notification not to do so, or if the auditor
believes that management or those charged with governance have failed to take
the necessary steps to prevent reliance on the auditor's report on the previously
issued audited financial statements despite the auditor's prior notification that
the auditor will take action to seek to prevent such reliance, the auditor's course
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of action depends upon the auditor's legal rights and obligations. Consequently,
the auditor may consider it appropriate to seek legal advice.
.A24 The actions that the auditor may take to seek to prevent reliance on
the auditor's report may depend upon the degree of certainty of the auditor's
knowledge that persons or entities exist who are currently relying or who will
rely on the audited financial statements, and who would attach importance to
the information, and the auditor's ability as a practical matter to communicate
with them. In addition to seeking legal advice, the auditor may consider taking
the following steps to the extent applicable:
•
Notify management and those charged with governance that the
auditor's report is not to be relied upon.
•
Notify regulatory agencies having jurisdiction over the entity that
the auditor's report is not to be relied upon, including a request
that the agency take whatever steps it may deem appropriate to
accomplish the necessary disclosure.
•
Notify anyone known to the auditor to be relying on the financial
statements that the auditor's report is not to be relied upon. In
some instances, it will not be practicable for the auditor to give
appropriate individual notification to stockholders or investors at
large whose identities are unknown to the auditor; notification to a
regulatory agency having jurisdiction over the entity will usually
be the only practical means for the auditor to provide appropriate
disclosure, together with a request that the agency take whatever
steps it may deem appropriate to accomplish the necessary disclosure.
.A25 Depending on the circumstances, if the auditor is able to determine
that the financial statements need revision, the auditor's notification to anyone
in receipt of the audited financial statements may, if permitted by law, regulation, and relevant ethical requirements,
•
include a description of the nature of the matter and of its effect
on the financial statements, avoiding comments concerning the
conduct or motives of any person.
•
describe the effect that the matter would have had on the auditor's
report if it had been known to the auditor at the date of the report
and had not been reflected in the financial statements.
.A26 If the auditor was not able to determine whether the financial statements need revision, the notification to anyone in receipt of the audited financial statements may indicate that information became known to the auditor
and that, if the information is true, the auditor believes that the auditor's report is not to be relied upon. The specific matter need not be detailed in the
notification.
Predecessor Auditor’s Reissuance of the Auditor’s Report in
Comparative Financial Statements (Ref: par. .19–.20)
.A27 An auditor may be requested by management or those charged with
governance to furnish additional copies of the auditor's report after the report
release date. Providing additional copies of the auditor's report is not a report
reissuance. In such cases, the auditor has no responsibility to make further
investigation or inquiry about events that may have occurred during the period
between the date of the auditor's report and the date of the release of the
additional copies.
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.A28 Additional responsibilities relating to the reissuance of a previously
issued auditor's report in connection with financial statements of a nonissuer
included in a registration statement filed with the SEC under the Securities
Act of 1933, as discussed in paragraph .A1, are addressed in section 925.
Predecessor Auditor’s Report Reissued
.A29 A predecessor auditor may be requested to reissue the auditor's report by a former client when prior period financial statements audited by the
predecessor auditor are to be presented on a comparative basis with audited financial statements of a subsequent period. A predecessor auditor's knowledge
of the current affairs of the former client is limited in the absence of a continuing relationship. Accordingly, a predecessor auditor may be in a position
to reissue the report if the predecessor auditor is able to make satisfactory arrangements with the former client to perform this service and if the predecessor
auditor complies with paragraph .19 to determine whether the previous auditor's report is still appropriate. A predecessor auditor is not required to reissue
the auditor's report. Either the current form or manner of presentation of the
financial statements of the prior period or one or more events might make a
predecessor auditor's previous report inappropriate.
.A30 Section 700 addresses the auditor's responsibilities when the auditor
is engaged to audit and report on a revision to prior period financial statements
audited by the predecessor auditor. 13 It also addresses the auditor's responsibilities when the predecessor auditor's report will not be presented. 14
13
14
Paragraph .A52 of section 700.
Paragraph .54 of section 700.
©2015, AICPA
AU-C §560.A30